A brief primer on the most common construction contract issues in Nebraska.

1. CONSTRUCTION CONTRACT ISSUES
IN NEBRASKA
PRESENTER:
CRAIG DIRRIM, PARTNER

2. PROJECT ACQUISITION AND CONTRACT
FORMATION

3. WHAT IS THE SCOPE OF “WORK”
One of the best and most recent construction law
treatises defines “scope” as follows:
“The parameters of contract “scope” are defined
by the contract itself and its express and
implied terms and conditions, interpreted
consistent with trade custom and practice, as
circumscribed by public policy considerations
and by legal excuses for nonperformance.”

4. THE CONSTRUCTION CONTRACT
Variables That Affect the Contract:
 Competitive bid vs. negotiation
 Status of design
 Relationship of the parties
 Structure of the project
 What “work” is the contractor to perform?
 Changing market conditions

5. THE CONSTRUCTION CONTRACT
Methods of Pricing:
 Fixed Price/Lump Sump
 Unit Price
 Cost Plus/Force Account

6. THE CONSTRUCTION CONTRACT
Problems with Construction Contracts:
 Boilerplate
 Disregarded
 One-sided
 Conflicting
 Not maintained
 Lacking in legal review
 Fail to address major issues

7. TOP TEN DANGER SIGNS FOR A PROJECT

8. TOP TEN DANGER SIGNS FOR A PROJECT
Limited Budget - Owner is short of extra cash for extra
work
Limited Time - Owner can’t afford to extend project
completion even in the face of unforseen conditions
Incomplete Design - When the final design hits the work
it may include unpleasant surprises
First Time Owner - The project is novel to the owner who
does not know what to expect
First Time Contractor - The project is novel to the
contractor who lacks the secrets experience brings

9. TOP TEN DANGER SIGNS FOR A PROJECT
First Time Designer - The project is novel to the designer
who will learn as the project is completed
Multiple Primes - Coordination of independent entities
becomes a significant problem
Soft Subs - Inexperienced, undercapitalized,
overextended subs with or without design responsibility
Killer Contracts - Unreasonable tough provisions may
mask the owner’s own deficiencies
No Construction Management - Owner does not hire
experienced, capable construction management and
does not pay the prime contractor to do it

10. NEGOTIATION OF CONSTRUCTION
CONTRACTS

11. NEGOTIATION OF CONSTRUCTION CONTRACTS
Make a record of the negotiations
Particular attention should be afforded the
definition of the scope of the project
Incorporate into the contract the actual
documents that define the scope and nature
of the work
Produce and sign the contract documents on
time, in advance of the work
Avoid unreasonable provisions

12. PRE-CONTRACT MEETINGS
Document What Was Said
Define the Project
Describe the Construction Commitments

13. MAKE YOUR AGREEMENT MATCH YOUR
UNDERSTANDING

14. UNDERSTANDING THE CONTRACT
Remember - don’t get angry, get with it:
Everything is negotiable

15. KILLER CONTRACT PROVISIONS

16. KILLER PROVISIONS
Short Notice and Claim Submission Provisions
Claim Waivers and Releases with Pay Applications
Lien Waivers
No Damages for Delays
Pay-if-Paid
One-sided Dispute Resolution
No limits on Consequential Damages
High or Uncapped Liquidated Damages
Scheduling of Work
Coordination of Work of Others
Default or Convenience Terminations
Broad Form Indemnification Agreements

17. SHORT NOTICE PROVISIONS
“No allowance for an extension of time for
any cause whatsoever shall be claimed by,
or granted to, [Contractor] unless
[Contractor] shall have made written request
upon [Owner] for such extension within forty
– eight (48) hours after the event giving rise
to such request…”

18. ABUSIVE NOTICE AND CLAIM SUBMISSION
PROVISIONS
Claim Submission:
For Claims vs. Prime: The Subcontractor shall,
within ten (10) days after such dispute arises,
submit its claim, in writing, to Contractor
attaching all supporting documentation. Should
additional documentation or information be
requested by Contractor, the Subcontractor shall
provide such documentation and/or information
promptly.

19. ABUSIVE NOTICE AND CLAIM SUBMISSION
PROVISIONS
Claim Waiver:
Failure by Subcontractor to deliver any claim for
alleged damages to Contractor within the time
limits set forth in this Section 21 and/or to
provide the required damage amounts and other
specific information and supporting
documentation shall constitute a waiver and
estoppel of Subcontractor’s rights with respect
to such claim for alleged damages.

20. CLAIM AND LIEN WAIVERS
Contractor for itself and as agent for all its suppliers,
[Contractor]s, and laborers, hereby irrevocably and forever
waives any and all rights arising under the mechanic’s lien
or construction lien laws applicable to any labor, materials,
equipment, or services provided pursuant to this Contract
or any changed or extra work performed by Contractor in
connection with the Project. Further, Contractor shall
indemnify and hold Owner harmless from any and all
claims of Contractor or others claiming through Contractor
arising under or pursuant to the mechanic’s lien or
construction lien laws applicable to the Project.

21. CLAIM AND LIEN WAIVERS
Contractor for itself and as agent for all its suppliers,
[Contractor]s, and laborers, hereby irrevocably and
forever waives any and all rights arising under the
mechanic’s lien or construction lien laws applicable to
any labor, materials, equipment, or services provided
pursuant to this Contract or any changed or extra work
performed by Contractor in connection with the Project.
Further, Contractor shall indemnify and hold Owner
harmless from any and all claims of Contractor or others
claiming through Contractor arising under or pursuant to
the mechanic’s lien or construction lien laws applicable
to the Project.
…hereby irrevocably and forever waives any and
all rights arising under the mechanic’s lien or
construction lien laws…
…Contractor shall indemnify and hold Owner harmless
from any and all claims…

22. “Article 5.4 provides:
The [Contractor] acknowledges that the Price is based on the fact that
[Owner] is not liable, absent actual fraud, for any damages or costs due to
delays, accelerations, impact, non-performance, interferences with
performance, suspension or changes in the performance or sequence of the
[Contractor]’s Work, even if [Owner] wrongfully denies an extension of time
to the [Contractor]. Thus, in no event absent actual fraud shall [Owner] be
liable to the [Contractor] for any damages caused by delay, acceleration,
interferences, suspension, non-performance or changes in the sequence of
performance or impact upon or with the work of the [Contractor]. [Owner]
shall have the right at any time, to delay, accelerate or suspend the
commencement or execution of the whole or any part of the Work, or vary the
sequence or performance thereof, without compensation to the [Contractor]
other than extending the time for completing the [Contractor]’s Work for a
period equal to such delay or suspension.

23. “Article 5.4 provides:
The [Contractor] acknowledges that the Price is based on the fact
that [Owner] is not liable, absent actual fraud, for any damages or
costs due to delays, accelerations, impact, non-performance,
interferences with performance, suspension or changes in the
performance or sequence of the [Contractor]’s Work, even if [Owner]
wrongfully denies an extension of time to the [Contractor]. Thus, in
no event absent actual fraud shall [Owner] be liable to the
[Contractor] for any damages caused by delay, acceleration,
interferences, suspension, non-performance or changes in the
sequence of performance or impact upon or with the work of the
[Contractor]. [Owner] shall have the right at any time, to delay,
accelerate or suspend the commencement or execution of the whole
or any part of the Work, or vary the sequence or performance thereof,
without compensation to the [Contractor] other than extending the
time for completing the [Contractor]’s Work for a period equal to
such delay or suspension.
…[Owner] is not liable, absent actual fraud…
…delays, accelerations, impact, non-performance,
interferences with performance, suspension or changes in the
performance or sequence…
…even if [Owner] wrongfully denies an extension of time to
the [Contractor].
[Owner] shall have the right at any time, to delay, accelerate
or suspend the commencement or execution of the whole or
any part of the Work, or vary the sequence or performance
thereof, without compensation to the [Contractor]…

24. PAY-IF-PAID PROVISION
Risk of Non-Payment by Owner: Receipt of
payment by Contractor from the Owner is a
condition precedent:
− to the right of Subcontractor to receive payment from
Contractor, unless the failure to have received
payment from the Owner shall have been caused
solely by the fault of Contractor; and
− to the Subcontractor’s right to make any claim
against Contractor ’s payment bond, if a payment
bond is posted for the Project.

25. ONE-SIDED DISPUTE RESOLUTION
“Limitation of Issues: The [Contractor] acknowledges that should
a dispute proceed pursuant to this Section, then the only issues
that the [Contractor] may raise in such proceedings are those
that were specifically included in its written claim submitted in
accordance with Section 34.2. Failure to specifically describe an
issue in the written claim within the time limits provided
constitutes a waiver of that claim and shall preclude the
[Contractor] from raising such claim in any court or arbitration
proceedings. Should any dispute between [Owner] and the
[Contractor] proceed to arbitration or to court, that forum shall
award to the prevailing party all of its attorney’s fees,
disbursements or costs as defined in Section 33.6 incurred in
connection with the prosecution or defense of the dispute.
Pending final resolution of any dispute, the [Contractor] shall
continue to fulfill all of its obligations under this Contract.”

26. ONE-SIDED DISPUTE RESOLUTION
“Limitation of Issues: The [Contractor] acknowledges that should a
dispute proceed pursuant to this Section, then the only issues that
the [Contractor] may raise in such proceedings are those that were
specifically included in its written claim submitted in accordance with
Section 34.2. Failure to specifically describe an issue in the written
claim within the time limits provided constitutes a waiver of that
claim and shall preclude the [Contractor] from raising such claim in
any court or arbitration proceedings. Should any dispute between
[Owner] and the [Contractor] proceed to arbitration or to court, that
forum shall award to the prevailing party all of its attorney’s fees,
disbursements or costs as defined in Section 33.6 incurred in
connection with the prosecution or defense of the dispute. Pending
final resolution of any dispute, the [Contractor] shall continue to fulfill
all of its obligations under this Contract.”
…the only issues that the [Contractor] may raise in such
proceedings are those that were specifically included in its written
claim…
…waiver of that claim and shall preclude the [Contractor] from
raising such claim in any court or arbitration proceedings.
Pending final resolution of any dispute, the [Contractor] shall
continue to fulfill all of its obligations under this Contract.”

27. ONE-SIDED DISPUTE RESOLUTION
“In the event the matter is submitted to a
court, [Owner] and [Contractor] hereby
agree to waive their right to trial by jury
and covenant that neither of them will
request trial by jury in any such litigation.”

28. NO LIMITATIONS ON CONSEQUENTIAL
DAMAGES
“Damages for Delay: Contractor shall be liable to
[Owner] for all damages, including any liquidated
damages payable to Owner for delays caused in whole
or in part by Contractor or Contractor’s employees,
agents, Subcontractors, material suppliers or any other
person or entity for whose acts Contractor may be liable.
In the event damages incurred by [Owner] are caused
both by Contractor and another entity for whose acts
Contractor is not liable, [Owner] shall have the right to
reasonably apportion said damages among the
responsible parties, and such apportionment shall be
binding on the Contractor.”

29. NO LIMITATIONS ON CONSEQUENTIAL
DAMAGES
“Damages for Delay: Contractor shall be liable to
[Owner] for all damages, including any liquidated
damages payable to Owner for delays caused in whole
or in part by Contractor or Contractor’s employees,
agents, Subcontractors, material suppliers or any other
person or entity for whose acts Contractor may be liable.
In the event damages incurred by [Owner] are caused
both by Contractor and another entity for whose acts
Contractor is not liable, [Owner] shall have the right to
reasonably apportion said damages among the
responsible parties, and such apportionment shall be
binding on the Contractor.”
…[Owner] shall have the right to reasonably
apportion said damages among the
responsible parties, and such apportionment
shall be binding on the Contractor.”

30. HIGH OR UNCAPPED LIQUIDATED DAMAGES –
WHAT TO LOOK FOR:
“Both parties agree that each Milestone Date in which
[Contractor] shall fail to meet the date as stated in clause
47.1 that [Contractor] shall be subject to Liquidated
Damages at a rate of $3,000 per day from day 1 through 7
and $10,000 per day for each day thereafter. It was also
agreed by the parties that at no time shall [Contractor] be
responsible for more than $25,000 per day for Liquidated
Damages for a combination of missed Milestones.
Furthermore it was agreed that Liquidated Damages shall
be limited to thirty percent (30%) of the Contract Price.
Both parties acknowledge that liquidated damages shall be
the Owner’s sole remedy for any schedule delay caused by
[Contractor].”

31. HIGH OR UNCAPPED LIQUIDATED DAMAGES –
WHAT TO LOOK FOR:
“Both parties agree that each Milestone Date in which
[Contractor] shall fail to meet the date as stated in
clause 47.1 that [Contractor] shall be subject to
Liquidated Damages at a rate of $3,000 per day from
day 1 through 7 and $10,000 per day for each day
thereafter. It was also agreed by the parties that at no
time shall [Contractor] be responsible for more than
$25,000 per day for Liquidated Damages for a
combination of missed Milestones. Furthermore it was
agreed that Liquidated Damages shall be limited to
thirty percent (30%) of the Contract Price. Both parties
acknowledge that liquidated damages shall be the
Owner’s sole remedy for any schedule delay caused by
…at no time shall [Contractor] be responsible for more
than $25,000 per day for Liquidated Damages for a
combination of missed Milestones.
…limited to thirty percent (30%) of the Contract Price.
…Owner’s sole remedy for any schedule delay…

32. SCHEDULING OF WORK
“The following shall apply to the prosecution of the
Work by the contractor and shall be performed or
provided by the contractor at no additional cost to
the Owner: The contractor shall prosecute the Work
at all times in accordance with the Construction
Schedule established by the Owner, as the same
now exists or may from time to time hereinafter be
revised by the Owner in its sole discretion, and shall
complete the Work, including all inspections, within
the “Working Days” as more particularly identified
and defined in the Construction Schedule.”

33. SCHEDULING OF WORK
“The following shall apply to the prosecution of the Work by
the contractor and shall be performed or provided by the
contractor at no additional cost to the Owner: The contractor
shall prosecute the Work at all times in accordance with the
Construction Schedule established by the Owner, as the same
now exists or may from time to time hereinafter be revised by
the Owner in its sole discretion, and shall complete the Work,
including all inspections, within the “Working Days” as more
particularly identified and defined in the Construction
Schedule.”
…at no additional cost to the Owner:
…in accordance with the Construction Schedule
established by the Owner…
…may from time to time hereinafter be revised by the
Owner in its sole discretion…

34. COORDINATION / REPORTING
REQUIREMENTS
Coordination: Subcontractor shall coordinate its operations
with all other contractors, subcontractors and trades
working on the Project. Before beginning its Work and
during the duration of its Work, Subcontractor shall perform
the requirements of Section 13.1 including written reports
to Contractor. Failure by Subcontractor to report any such
defective or uncompleted work by others shall constitute a
waiver and estoppel of any claim by Subcontractor for any
damage or for any claim for an extension of time arising out
of such defective or uncompleted work. Further,
Subcontractor shall be liable to Contractor for any damage
caused Contractor by Subcontractor’s failure to report any
such defective or uncompleted work by others.

35. COORDINATION / REPORTING
REQUIREMENTS
Coordination: Subcontractor shall coordinate its
operations with all other contractors, subcontractors and
trades working on the Project. Before beginning its Work
and during the duration of its Work, Subcontractor shall
perform the requirements of Section 13.1 including written
reports to Contractor. Failure by Subcontractor to report
any such defective or uncompleted work by others shall
constitute a waiver and estoppel of any claim by
Subcontractor for any damage or for any claim for an
extension of time arising out of such defective or
uncompleted work. Further, Subcontractor shall be liable
to Contractor for any damage caused Contractor by
Subcontractor’s failure to report any such defective or
uncompleted work by others.
Failure by Subcontractor to report any such defective or
uncompleted work by others shall constitute a waiver
and estoppel of any claim.
Subcontractor shall be liable to Contractor for any
damage caused Contractor by Subcontractor’s failure
to report any such defective or uncompleted work by
others.

36. DEFAULT OR CONVENIENCE
TERMINATIONS
“In the event any termination of Contractor
for cause under this Contract is later
determined to have been improper, the
termination shall be automatically
converted to a termination for
convenience, and the Contractor shall be
limited in its recovery strictly to the
compensation provided for in this Section.”

37. INDEMNIFICATION AGREEMENTS
The Contractor shall indemnify, hold harmless
and defend the Owner and Architect from and
against any and all claims, causes of action,
suits, losses, costs or damages including but
not limited to attorney’s fees arising out of or
resulting from performance of the work. The
Contractor hereby expressly indemnifies the
Owner, and Architect for the consequences of
any negligent act or omission, including the
sole negligence, of the Owner, Architect, their
agents, servants, and/or employees.

38. FORUM SELECTION/CHOICE OF LAW
Example:
Any dispute arising out of or related to this
Subcontract . . . shall be settled by litigation in a
court of law venued in the appropriate state or
federal court in Hennepin County, Minnesota,
which court the parties agree has jurisdiction
over and is the most convenient forum for the
resolution of said dispute.

39. FORUM SELECTION/CHOICE OF LAW
Model Uniform Choice of Forum Act
Neb. Rev. Stat. §§ 25-413 to 25-417:
(1) the court has subject matter jurisdiction
(2) Nebraska is a reasonably convenient place for trial
of the action;
(3) the forum selection provision was not obtained by
misrepresentation, duress, the abuse of economic
power, or other unconscionable means; and
(4) service of process on the Defendant was not
defective.

40. SETOFF (ON OTHER PROJECTS)
Example:
Buyer may deduct from any amounts due or to
become due to the Seller pursuant to this
Purchase Order, any sums due or to become
due to the Buyer from the Seller or any of the
Seller’s affiliates, predecessors in interest,
previous affiliates, or previous ownership
interests, whether or not said sums are in any
way related to this Purchase Order or Project.

41. TERMINATION (CONVERSION
CLAUSES)
Termination for default (T for D)
Termination for convenience (T for C)
Limitation of remedies
Termination conversion clauses

42. TERMINATION (CONVERSION
CLAUSES)
Example:
If Contractor’s termination of Subcontractor is
based upon a reason that is subsequently
determined to not be a default of this
Subcontract, such termination shall
instantaneously and automatically be deemed a
termination for the convenience of Contractor.

43. BROAD FORM INDEMNITY
Example:
The subcontractor shall indemnify, hold harmless and
defend the contractor, owner and architect from and
against any and all claims, causes of action, suits,
losses, costs or damages including but not limited to
attorney’s fees arising out of or resulting from
performance of the work. The subcontractor hereby
expressly indemnifies the contractor, owner, and
architect for the consequences of any negligent act or
omission of the contractor, owner, architect, their
agents, servants, and/or employees.

44. BROAD FORM INDEMNITY
Void as against public policy -- Neb. Rev.
Stat. § 25-21-187
The statute does not apply to construction
bonds or insurance agreements.

45. INCORPORATION BY REFERENCE/ORDER
OF PRECEDENCE
Example:
The “Subcontract Documents” consist of (1)
Exhibit E, any modifications to the Standard
Form Subcontract Agreement; (2) Exhibit A; (3)
Exhibit C; (4) Exhibit B . . . In the event of any
conflicts in the Subcontract Documents, the
provisions shall govern in priority in the order
listed in this provision.

46. THANK YOU!
CRAIG DIRRIM
301 SOUTH 13TH STREET, SUITE 500
LINCOLN, NE 68508
(402) 437-8500
CDIRRIM@WOODSAITKEN.COM